Legal standpoint of borrowing from Parents to help pay back the flat I brought on sha

lozsta

Just under 5 years ago life was different I was single, going out rather a lot and unable to save for a deposit. So I went ahead and bought a new build flat in the centre of town.

The flat was purchased with a mortgage, the vendor/developer paying 25% and I paid the remaining 75%. The 25% was interest free for 5 years.

No we snap to the beginning of this year. I am happily engaged to a beautiful lady, getting married shortly and living in our own 3 bed home. However, I have been letting my flat out and have it up for sale but it is not moving. I am worried as the interest period will kick in around June. Now I have posed the question to the parents that they lend me the money and I will pay them back when it sell.

My worry is that there will be some issue with lending me £27k (in the scheme of things not that much money) and me just paying them back. Can anyone advise what I will need to do, or what the process will entail? I am just imagining them writing me a cheque for the developer and me handing it over to them.

xylophone

I can't see that there is any problem with your parents lending you a sum of money.

If you are going to pay them interest, then depending on their tax situation they may need to declare it to HMRC.

Presumably you will set up a simple signed and dated loan agreement on the lines of " I acknowledge receipt of a loan of £x (interest free or state interest rate) from NN repayable on......(state terms).

Pixie5740

You will probably find it difficult to sell the property whilst you have tenants. People generally require vacant possession of a property unless they are BTL investors happy to take on the current tenants.

lozsta

xylophone wrote: »

I can't see that there is any problem with your parents lending you a sum of money.

If you are going to pay them interest, then depending on their tax situation they may need to declare it to HMRC.

Presumably you will set up a simple signed and dated loan agreement on the lines of " I acknowledge receipt of a loan of £x (interest free or state interest rate) from NN repayable on......(state terms).

Thank you. That is excellent news. They will not be charging any interest. :rotfl:

As for selling with tenants, I have 4 weeks notice to give them and they are out. They will not affect the sale in any way. This is not a stately home, it is a one bed flat lol

Mattygroves2

lozsta wrote: »

Thank you. That is excellent news. They will not be charging any interest. :rotfl:

As for selling with tenants, I have 4 weeks notice to give them and they are out. They will not affect the sale in any way. This is not a stately home, it is a one bed flat lol

I wouldn't even view a flat with tenants even if I was sure they'd be gone by completion time. Also if they dig their heels in and you have to evict them then it will take much longer than 4 weeks to get rid of them. If you are serious about selling serve them notice and market the property empty.

00ec25

there are no circumstances under which a non resident LL can legally give notice of only 1 month, the requirement is 2 months

I appreciate you are an accidental LL and unlikely to continue as one, but do not assume that you can do as you please when depriving someone else of their home and that said person will cooperate with your plans

SerialRenter

lozsta wrote: »

As for selling with tenants, I have 4 weeks notice to give them and they are out. They will not affect the sale in any way. This is not a stately home, it is a one bed flat lol

No no no no no no no.

Firstly, 4 weeks notice? no, you need to give a minimum of 2 rental periods notice, so 2 months. To do this you'd need to serve an S21 notice, which you must complete perfectly else it will not be valid. Can you confirm the tenants deposit is protected and in a scheme? If it's not, the deposit must be returned in full before you serve the notice, else its not valid.

Secondly, the S21 is just a notice to seek position, its not a "you must be out by this date" notice. It just tells the tenants you intent to go to court to regain possession. This could take months and months.

Thirdly, does your lease actually allow you to rent it out? I thought shared ownership schemes were a bit picky about that sort of thing. Does your bank know your letting and have they given permission?
Have you declared your rental income to HMRC?
Have you been doing full gas safety checks every year?

All of this affects your sale. Potential buyers are going to be put off by this, they'll want the property vacant before they proceed.

Pixie5740

lozsta wrote: »

As for selling with tenants, I have 4 weeks notice to give them and they are out. They will not affect the sale in any way. This is not a stately home, it is a one bed flat lol

What's the size of the property got to do with price of fish? Tenancy law is tenancy law, just because you're letting out a small property doesn't mean that it doesn't apply to you. You still need to follow the correct process of serving a section 21 notice to your tenants and then getting a court order to evict if it gets that far? Did you take a deposit from your tenants? If so I hope you protected it otherwise any section 21 you issue will be invalid.

No lender will grant a mortgage on a property that has tenants, vacant possession will be required. As I said already, having tenants will make the property difficult to sell. Serve your tenants notice (I'm assuming they are on a statutory periodic tenancy and not a fixed term), and once they have moved out you stand a much better chance of selling the property.